Many at risk of financial ruin after an injury

With many Canadians carrying more debt than ever before, an increasing number of injured people need financial help during litigation, says Easy Legal Finance Inc. president and CEO Larry Herscu.

“We’re seeing a wide variety of clients coming to us for help in this economic climate,” he tells AdvocateDaily.com.

The company specializes in helping people who have been hurt in an accident by providing financial support to pay their bills while their lawyer fights for a fair settlement, he says.

Increasingly, Easy Legal Finance is seeing more applications from people who have well-paying jobs, but live paycheque to paycheque, mainly because of a large mortgage and little savings, Herscu says.

The Bank of Canada says the number of households that owe at least 3.5 times their gross income has doubled since before the financial crisis, reports the Globe and Mail. For many, their large mortgages have pushed them into a “high-wire act with no safety net,” according to the article. A Manulife survey found that 25 per cent of people have saved just $1,000 for emergencies, says the Globe.

A 2016 survey by the Canadian Payroll Association found that about half of Canadians would have a tough time paying their bills if their paycheque was just a week late, reports CBC.

Herscu says the end result is that when those people are injured in an accident and they can’t return to work afterward, they soon can’t afford their house or lifestyle. Some can’t even afford to take the bus to visit a doctor for rehabilitation.

“They come to us for help because of the indebtedness they have,” he says. “They don’t have income because they can’t work. They can’t go to a traditional lender and they are in trouble financially because they have overextended themselves. Most traditional lenders require regular payments back and we’re talking about people who are injured and unable to work. They cannot make regular payments. It’s a vicious circle, as those who fall behind on their debt payments may end up with a bad credit rating.”

Herscu says because litigation takes so long in Canada, people often need financial help through that process.

“A large part of somebody’s claim is their lost wages,” he says. “Many people would never have imagined being injured and not being able to work, or afford to get the help they need to recover.”

Many people come to Easy Legal to obtain money to bridge the gap until their litigation is completed, Herscu says.

“Some people are just looking for money to get them through because they have been cut out of income-replacement benefits by their insurer,” he says.

Herscu says Easy Legal works directly with each client's lawyer during the settlement loan process.

“We require that clients discuss their intention to borrow money with their lawyer upfront,” he says. “We won’t provide an advance without talking to the lawyer first. We won’t over-leverage a client because we don't believe people should necessarily borrow money.

"If they do decide to borrow, they should seek the least amount possible.”

Herscu says Easy Legal takes a conservative approach, typically limiting loans to 10 to 15 per cent of the estimated value of the claim.

“And if the case does not settle, we assume 100 per cent of the risk, with no impact to the lawyers or their clients,” he says.

“We align our interests with that of the client and we don’t require loan repayments until their claim settles — and if their case isn’t successful, they don’t have to pay us back the principal or the interest."

Herscu says that while Easy Legal doesn't fund litigation nor does it pay for clients to hire a lawyer, the company will help people with their short-term financial needs to give their counsel time to work through the legal process.

"This helps them gain access to justice," he says. "Without funding, many people are forced to not seek treatment for their injuries or, in some cases, face financial ruin because there is no income stream to help them. This process buys them some time."